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Pair Trade? Bob Peck Starts PayPal At Buy, Maintains Neutral On eBay

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In a report published Monday, SunTrust Robinson Humphrey analyst Robert S. Peck initiated coverage of Paypal Holdings Inc (NASDAQ: PYPLV) with a Buy rating and a price target of $45, saying that the company was a leader in a “large, growing TAM” and had “ample capital capacity” to fund growth.

“The company is a leading enabler of online and in-app payments, thus levered to secular growth of electronic payments and e-commerce (16% CAGR), including mobile (28% CAGR),” analyst Robert Peck said. PayPal’s immediate revenue TAM of B2C ecommerce was estimated at more than $45B, while total “stretch” TAM, including B2C, remittance, B2B and in-store, could be about $500B.

PayPal has more than $6B in cash as well as the capacity to raise about $5B in debt. “Per management, inorganic growth is core to the growth strategy and key areas of focus include: in-store (acquisition of a global processor could make a lot of sense), P2P payments, P2P lending, SMB lending, and loyalty/rewards. The company has a strong recent track record of M&A,” Peck said.

In another report, SunTrust analyst Robert Peck maintained a Neutral rating on eBay Inc (NASDAQ: EBAY), with a price target of $30, saying that the company was in the initial phases of its turnaround effort.

In the report SunTrust cited the positives for eBay as:

  • “the platform is beginning some transformation initiatives, especially structured data, which are key to reaccelerating growth and user engagement
  • significant FCF and debt leverage capacity afford material financial flexibility
  • disciplined M&A strategy targeting geographical expansion internationally and tech/talent in the U.S. can drive LT growth
  • shareholder-friendly actions including returning capital should enhance returns”

Peck believes that although the initial results from the company’s platform initiatives had been “encouraging,” there is likely to be limited near-term growth “until the multi-year transformation begins to deliver.” Moreover, while eBay has a constraint on the amount of shares it can repurchase over the next two years, “it can thereafter lever up to aggressively return capital, which could deliver outsized returns.”

Latest Ratings for PYPLV

DateFirmActionFromTo
Jul 2015BairdInitiates Coverage onOutperform
Jul 2015JP MorganInitiates Coverage onOverweight
Jul 2015SunTrust Robinson HumphreyInitiates Coverage onBuy

View More Analyst Ratings for PYPLV
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Posted-In: SunTrust Robinson HumphreyAnalyst Color Initiation Analyst Ratings

 

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